Changing Perspective: From Cost to Revenue

The U.S. Bureau of Labor Statistics recently reported that U.S. employees are paid an average of $27.75 an hour in wages and benefits. Seventy percent of that amount is for wages, and 30% is for benefits.

This equals an annual outlay of almost $58,000 per employee. However, instead of looking at how much an average employee costs an organization per year, a better perspective and evaluation point may be revenue-per-employee. This can be a good barometer of how efficient a company is with its human capital, as well as employee productivity.

As a baseline measurement for excellence, the top 25 companies as measured by revenue-per-employee on Fortune's list of America's Fastest Growing Small Public Companies averaged between $500,000 and $3.5 million per employee. Whether your organization can reach or exceed these levels may in large part be dependent on your company's hiring process.

Generating high revenue-per-employee starts with hiring the right people for the right job. Putting the wrong person in the wrong job may actually cost your company money, resulting in constant turnover, loss of critical knowledge, recruiting and training costs, and lower productivity. The impact of this churn to the bottom line can well exceed 100% of a position's annual salary.

Taking a revenue-per-employee approach versus a cost-per-employee may result in hiring a more qualified employee at a higher salary. Yet the return in pro¬ductivity may far exceed the higher wage. The focus on revenue-per-employee changes the organization's hiring perspective and approach from low cost to investment. And as any financial adviser will tell you, the better the investment, the better the returns.